Cryptopia hack worrying investors
AUCKLAND: Investors caught up in the multimilliondollar Cryptopia digital currency hack are increasingly worried about the lack of information from the company and the police, a New Zealand expert says.
Cryptocurrency and tax specialist Campbell Pentney, from law firm Bell Gully, said in past overseas crypto exchange hacks, information often emerged fairly quickly about the size of the theft, what percentage of overall funds were involved and which cryptocurrencies were stolen.
However, 10 days after a range of currencies were stolen from the Christchurch digital assets exchange, it was still not clear how big the problem was. The police issued an updated statement last week, but without specifics. The company was referring inquiries to police.
This lack of information had led to speculation on cryptocurrency news sites that it could be a large hack, or at least one involving a considerable percentage of Cryptopia’s funds. This could be bad news for investors, particularly if it caused the company to collapse.
‘‘It’s still in limbo,’’ Mr Pentney said. ‘‘The police say they are following leads, but investors are getting pretty upset with the lack of information.’’
One issue affecting some investors was not being able to get transaction records for their tax returns as Cryptopia’s systems were locked.
‘‘These cryptocurrency trades are not on the blockchain; it’s Cryptopia’s internal systems that are doing the transactions. People can’t get their records, so they can’t sort their tax.’’
In addition, some people were worried about whether passport records that might have been given to Cryptopia might be available to the hackers.
One of the few things that is certain is that $3.5 million worth of cryptocurrency has gone. A transfer involving that sum is visible, although noone knows who owns the digital wallet that lot of stolen Cryptopia funds turned up in.
However, commentators suspect considerably more funds in at least two digital wallets also came from Cryptopia. Some say total stolen tokens could be more than $20 million or even as much as $40 million.
‘‘We expect the
next
breaking development will be a statement of the amount involved,’’ Mr Pentney said.
So far there is no visible sign any Bitcoin has been stolen from Cryptopia, although there are rumours on social media that the world’s most popular cryptocurrency might be involved. However, commentators suggest $US3.5 million
($NZ5 million) of Ether has gone. Ether, associated with the popular Ethereum blockchain, is the second most popular cryptocurrency.
It is also unclear how many New Zealand investors have been affected. Cryptopia said in October last year it had more than two million users worldwide, double the figure at the end of 2017. Staff numbers at the company had increased to 90 — 80 in New Zealand and 10 at a support centre in the UK.
Mr Pentney said Cryptopia would have had a relatively higher percentage of New Zealandbased customers in 2017, when it ran the NZ dollar token, the first cryptocurrency coin tethered to the NZ dollar. The NZDT gave New Zealanders the opportunity to use money in their NZ bank accounts to buy and sell digital currencies.
However, the NZDT was pulled in late 2017, after Cryptopia’s bank got cold feet. This means there was no particular advantage for New Zealand investors trading on Cryptopia, and a bigger percentage of investors were likely to have been from overseas.
While Cryptopia was small in global terms, it dealt in some of the smaller cryptocurrencies, Mr Pentney said. So freezing trade at Cryptopia could have a disproportionate impact on some of these tokens.
Mr Pentney said history was mixed in terms of whether investors had got their money back after other big cryptocurrency hacks. Because cryptocurrency values were so volatile, the longer the process took, the more difficult it was to work out what investors were owed.
‘‘The best resolution is the thief is caught, he or she hands over private keys and then police have access to the assets,’’ Mr Pentney said. ‘‘But it’s not looking particularly great in terms of getting them back, particularly if the thief is offshore.’’
Meanwhile, some of the stolen Cryptopia tokens sent by the hacker from the visible wallet to the giant international cryptocurrency exchange Binance have been frozen by that exchange.
Mothership, another exchange whose cryptocurrency was involved in the Cryptopia hack, is looking at offering new digital tokens to investors and cancelling the old ones, as a way of giving people their funds back. — BusinessDesk